Abstract

The goal of this research is to determine how the regulatory burden represented by an entire class of laws impacts firm choice decisions. To achieve this end, a comprehensive list of 135 labor regulations that existed in at least one state between 1899 and 1924 was collected. Temporal and regional trends in the passage of labor legislation are described. Significant regional variability is found, with different parts of the nation favoring different classes of labor legislation. Evidence for the presence of regional homogeneity is found. Outlier states that do not fit the overall regional pattern are identified and discussed. Four summary variables are developed using principal components analysis. These variables represent first wave labor laws, second wave labor laws, mining laws, and anti-union laws. First wave laws were common laws passed in most states by 1909. First wave laws were general in nature and probably not binding on employers. Most states enacted second wave laws after 1909. The pattern of passage of these laws was more uniform than that of first wave laws, with most states adopting the more progressive second wave laws by 1924. Anti-union laws also experienced relatively little growth, but were most common in the Southeast. Three of the four summary variables were incorporated into a four-input translog cost function model of state manufacturing establishments over the 1899 to 1919 period. In addition, a variable representing state appropriations for labor programs and enforcement was included in the translog model. Increases in labor legislation resulted in an increase in demand for materials and salaried labor, and a decrease in demand for wage labor. Increases in the number of first wave laws led to an increase in salaried labor demand, possibly due to bureaucratic requirements associated with regulatory compliance. First wave laws had no impact on wage labor, confirming the findings of many that these early laws codified existing practice. In contrast, second wave laws significantly reduced wage labor demand, suggesting that these laws were binding.

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